By Okoi Obono-Obla
President Bola Ahmed Tinubu’s administration has embarked on bold reforms: the withdrawal of fuel subsidies and the floating of the naira. These measures have unleashed economic pain on ordinary Nigerians, yet they have earned praise from international rating agencies such as S&P Global and Frontier Markets Systems, and multilateral institutions like the World Bank and the International Monetary Fund.
Opposition leaders, including Peter Obi and Atiku Abubakar, dismiss these reforms as hollow. They accuse the government of reckless borrowing, warning that it worsens poverty, insecurity, and fiscal instability. The government counters that loans are essential to bridge Nigeria’s vast infrastructural gaps and insists the country remains creditworthy.
So, is it wrong for a government to borrow?
Borrowing as a Tool, Not a Vice:
Borrowing is not a sin. It is a fiscal instrument used by governments worldwide. The real question is whether borrowed funds are invested productively. Borrowing to build roads, power plants, and schools can spur growth. Borrowing to cover recurrent expenses or corruption-driven spending, however, deepens poverty and instability.
Merits of Borrowing:
– Infrastructure development creates jobs and builds future capacity.
– Economic stabilization cushions shocks during recessions or emergencies.
– Future growth ensures projects benefit generations ahead.
– Global credibility signals confidence to investors.
Demerits of Borrowing:
– Debt servicing burden drains government revenue.
– Future taxation shifts the burden onto citizens.
– Inflationary risks erode purchasing power.
– Crowding out reduces private sector investment.
Global Debt Context:
Even wealthy nations are chronic debtors:
– Japan: 230% debt-to-GDP, the world’s highest.
– United States: 134%, the largest absolute debt globally.
– Italy: 137%, long-standing debt challenges.
– United Kingdom: 110%, stable but indebted.
– Brazil: 91%, burdened by high interest.
– Australia: ~44%, relatively low debt.
African Debt Comparisons:
– Nigeria: 52.9% debt-to-GDP, moderate but strained by weak revenue.
– Egypt: 83.8%, high external debt.
– South Africa: 78.9%, rising debt amid slow growth.
– Kenya: 67.8%, heavy borrowing for infrastructure.
– Ethiopia: 32%, relatively low debt.
– Algeria: 54.1%, moderate debt.
– DR Congo: 96.8%, high debt burden.
– Ghana: 48.8%, struggling with restructuring.
Nigeria in Perspective:
Nigeria’s debt ratio is lower than Egypt, South Africa, and Kenya, but higher than Ethiopia and Ghana. Compared to wealthy nations like Japan and the US, Nigeria’s debt is moderate. The real danger lies not in the size of the debt but in Nigeria’s low revenue base. With debt service consuming more than government earnings, even moderate borrowing feels crushing.
Conclusion:
Borrowing is not wrong. It is a neutral fiscal tool. The difference lies in management and purpose. Borrowing for infrastructure and growth is beneficial; reckless borrowing without accountability worsens poverty and instability. Nigeria’s debt ratio is moderate compared to global peers, but its weak revenue base makes debt sustainability a pressing concern.
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